Exemption from Capital Gains Tax for People Over 65 Years Old

Capital Gains: What Are They, and How Are They Taxed?

Capital gains on a property represent the profit obtained from its sale—that is, the difference between the purchase price and the sale price, adjusted for certain mandatory expenses.

Only 50% of this profit is taxable under the IRS. The capital gains tax varies depending on the applicable IRS rate, which is based on the taxpayer’s total income. This could potentially significantly impact the net transaction value.

Certain expenses related to the sale can be deducted to reduce the taxable amount, such as deed costs, registration fees, and real estate agency commissions. Additionally, if the property was purchased before 1989, it is automatically exempt from capital gains tax, a rule designed to protect assets acquired before the current IRS Code was implemented.

For sellers over 65 years old, there is a special scheme that allows for tax exemption, provided that the funds from the sale are invested in specific financial products. This tax benefit can be particularly advantageous for those who wish to sell a property without losing a significant portion of the proceeds to taxes.

How Does the Capital Gains Exemption for People Over 65 Work?

The 65+ capital gains exemption applies when the proceeds from the property sale are reinvested in a financial product designed to ensure greater financial stability during retirement.

According to the current legislation, sellers who reinvest the sale amount into a PPR (Retirement Savings Plan) or an insurance product that guarantees periodic payments can benefit from this tax exemption.

To qualify for the exemption, the reinvestment must be made within six months of the sale and declared in the IRS tax return for the year of the transaction. If the entire sale amount is invested according to the established rules, the taxpayer is exempt from paying capital gains tax, making the property sale more profitable.

Furthermore, it is essential to ensure that the selected PPR or other financial product meets the criteria set by the Tax Authority. If only part of the amount is reinvested, the exemption will be applied proportionally only to the reinvested amount.

If you plan to sell a property but want to avoid paying capital gains tax, this can be an excellent strategy to preserve your capital and enhance financial security in retirement.

The Importance of Planning Before Selling

Before starting the process of selling a property, you should conduct a detailed analysis of the tax impact of the transaction and consult experts to determine the best options for maximizing your profits and reducing costs. If you are over 65, you should immediately consider the necessary conditions to benefit from the capital gains exemption and ensure that the process is carried out correctly.

Consulting a specialist in the field can help clarify doubts and avoid mistakes that could jeopardize your tax benefit. Engel & Völkers provides personalized advisory services, guiding clients from the decision to sell through to the final transaction, ensuring all tax obligations are met following the law.

Another crucial factor to consider is the best time to sell. The real estate market is dynamic, and conditions can significantly influence the final transaction value. Assessing demand, price trends, and economic forecasts can make a substantial difference for those looking to maximize profits and minimize costs.

Using a real estate agency to sell your property gives you access to a broad network of potential buyers and streamlines the negotiation process.

Engel & Völkers’ Support in Selling Your Property

Engel & Völkers offers a comprehensive service for property owners who want to sell their properties safely and profitably. From property valuation to final negotiation, their team of expert consultants provides professional guidance at every stage of the process.

In addition to granting access to a global buyer network, the brand uses advanced real estate marketing tools to promote properties effectively.

With a transparent approach focused on clients' needs, Engel & Völkers helps define the best sales strategy, maximizing transaction value while ensuring full compliance with legal requirements.

Contact Engel & Völkers today to learn how we can help you sell your property safely and advantageously. Our team is ready to provide personalized service, ensuring a smooth transaction with maximum profitability.